Car finance and the PCP deal - how car buying went into credit

The boom in consumer car finance has been a defining feature of car ownership in the last decade; we look at the stats...

The cars we buy have changed dramatically over the past decade but so has the way we buy them. In 2010, 517,000 new cars were bought by consumers on finance and by 2019 that figure had jumped 80% to 933,000. The market actually peaked in 2016 when over a million cars were bought on finance, adding up to 88% of the UK’s private car sales that year.

In 2008, the majority of cars bought on finance were still on Hire Purchase (HP) agreements where the buyer would pay a deposit and make monthly payments with interest until the cost of the car was paid off. By 2010, the Personal Contract Purchase (PCP) deal was starting to take hold. After the initial deposit and a series of monthly payments, a PCP customer has the option of making the final balloon payment to own the car outright or handing the car back and potentially using any equity left in the agreement as a deposit on a new model.

This flexibility of the PCP, with its low monthly payments and the choice of whether or not to take ownership of the car at the end of the deal, helped it grow in popularity with UK car buyers. Dealers love them because they know that when they sign a customer up to a PCP, they are very likely to be back in three years with the equity in their deal ready to be placed as a deposit on another new car. 

Whereas in 2010 under 60% of new cars sold at dealerships were bought on finance, in 2020 it’s closer to 90%. The total UK car finance debt stands at around £75bn owed on 6.5m cars and those levels have caused alarm bells to be sounded in some quarters as the prospect of a recession looms. This dramatic change has been driven by the PCP deal, which accounted for 75% of the UK’s consumer car finance market in 2019. 

  1. 10 years of Carbuyer
  2. Car buying in the digital world 
  3. What’s changed in the UK car market?
  4. What kind of cars do UK buyers like best?
  5. MPG, emissions and going electric: what does it all mean for car buyers?
  6. How far has car safety come in a decade?
  7. Car finance and the PCP. How car buying went into credit
  8. The future of cars and car buying

Most Popular

New Renault Austral SUV replaces Kadjar for 2022
2022 Renault Austral
Renault
6 Dec 2021

New Renault Austral SUV replaces Kadjar for 2022

How much does it cost to charge an electric car?
How much does it cost to charge an EV
Electric cars
3 Dec 2021

How much does it cost to charge an electric car?

Top 10 best car battery chargers 2021
Top 10 best car battery chargers 2021
Tips and advice
25 Nov 2021

Top 10 best car battery chargers 2021

Tips & advice

View All
Car dashboard warning lights: the complete guide
Car dashboard symbols and meanings
Tips and advice
10 Aug 2021

Car dashboard warning lights: the complete guide

Electric car charging stations: a complete guide
Electric car charging station
Tips and advice
5 Nov 2021

Electric car charging stations: a complete guide

PCP vs HP – which type of car finance is right for you?
PCP vs HP
Tips and advice
29 Sep 2021

PCP vs HP – which type of car finance is right for you?

Average speed cameras: how do they work?
Average speed cameras: how do they work?
Tips and advice
23 Jul 2021

Average speed cameras: how do they work?

Best cars

View All
Top 10 best car interiors 2021
Peugeot 208 hatchback
Best cars
25 Jun 2021

Top 10 best car interiors 2021

Top 10 best electric cars 2021
Ioniq 5
Best cars
1 Dec 2021

Top 10 best electric cars 2021

Top 10 best cheap-to-run cars 2021
Toyota Prius front 3/4 cornering
Best cars
10 Jun 2021

Top 10 best cheap-to-run cars 2021

The UK's top 10 fastest hot hatchbacks
Audi RS 3 driving - front view
Hot hatches
27 Oct 2021

The UK's top 10 fastest hot hatchbacks